tv [untitled] August 7, 2010 6:00am-6:30am PST
legislation is neutral as it will be offset by supported fee revenue. in the original version of the legislation that we analyzed it might foot -- might not completely account for all of the whole consumption, so the supervisor has advocated a 25% reduction in the fee over the costs incurred. the fee as originally proposed was $0.76 per ounce with a higher amount of alcohol. coming directly from the nexus
study, indicating the city's alcoholic travel costs and services in the public departments and fire department. with administrative costs and total attributable costs for expected alcohol abuse in the city is $18.1 million, the maximum fee revenue that the city can recover. in terms of the fee calculation and where it comes from, nexus study based on california alcohol consumption profiles, there are 300 and set -- 57 million drinks annually served in san francisco, turning in the 214 million ounces of alcohol, dividing it into the cost that we have it would lead to the maximum allowable feed of 8.4 5 cents an ounce -- four counts of alcohol sold. -- 8.45 per ounce of alcohol
sold. the nexus study derived its estimate based on the average per capita alcohol consumption in california. a reasonable consumption that reflects available hard data, however sentence cisco has a significantly larger restaurant and bar industry than the average california place, therefore considering that it is likely that the per capita alcohol consumption is significantly higher than it is in california as a whole. what it means is charging a fee based on the resumption of california average consumption likely leading to an overconsumption of fee revenue. our estimates, which i will show you on the next page without going into detail, the san francisco per-capita alcohol consumption being 25% higher
than the state average. in terms of how the feed affects the economy, it will directly fall on distributors, who will face a choice of whether or not to simply reduce their income, payments, and suppliers, or trying to pass the feet forward to local retail outlets. because the san francisco wholesale market is a small piece of the national market, it is unlikely that they will be able to force suppliers to accept a lower price. however, on the other hand, because local retail outlets cannot obtain all call it beverages except from a distributor that pays the fee, these retailers will not be able to evade through higher wholesale prices. we would expect that the wholesaler would do that.
shifting the burden of a fee on to the retail outlets. they in turn have a similar choice about accepting that as a reduction of their own income or trying to pass the fee on to final consumers. to the extent that they try to pass it on to final consumers, it would raise the retail price paid, tending to reduce consumption to a degree and extent to which consumption will go down depending on the role of the feet and the extent to which it raises retail prices and percentage terms. the price sensitivity of consumers, i will share calculations with you in a moment. ultimately the overall economic impact depends on reduced spending at retail outlets that serve alcohol because of the tire price consumption. consumers will be spending
additional money to pay for the feed as well as the positive economic impact pherae f -- impact. how the fee would affect a per serving on different types of magalie beverages, it is charged in the original version per ounce of alcohol, so it is relatively bigger per ounce. of course, a serving of beer has less alcohol. it basically works out to 4 cents per glass of beer. 4.7 cents. however, off how that affects retail prices is different. >> i am curious if it changes in the analysis, or if it does is
just a minor changes. >> if the amendments brings it down 25%. >> the change? it reduces by 25%? >> the reason for going to the ounces to the galleons helps with billing through the tax collectors without a wide variety of different types of alcohol being measured. >> so, 4 cents, 5 cents, 6 cents is a serving vb. a different effect on the restaurant and bar world where retail prices are also quite a bit higher than a liquor store or grocery store environment. based on typical retail prices of $3.75 for 12 ounces of beer
and $6 for a glass of wine, that is in the neighborhood of half of a percent to 1% price increase. different types of the alcoholic beverages has a different elasticity of demand. consumers are price sensitive to changes in those markets to different extents. much less sensitive to change than the price of beer. a 1% price increase in beer will have very little effect as far as consumers tending to be much more sensitive to the price of spirits with only a 6% increase in that cocktail leading to a 1% reduction. the situation by a liquor stores is a larger effect. the same effective feet per serving, but less at some places. we are figuring a retail price
per serving of $1 for a beer based on the six pack costing $6 or that wine is about $2.50 per serving based on a $12 bottle of wine for $1.20 per serving in spirits. 4% for beer and spirits, 2.5% for wine. leading to a larger reduction or consumption in the hit to the business of grocery and liquor stores, between 1% and 2% for beer and spirits. so, this reduction in consumption has impacted what we think the fee revenue would be. i should say that this revenue assumption needs to be reduced based on the supervisors amendment to reduce it by 25%,
with a lot of uncertainty. i would not want people to bank on this in the first year. there is much uncertainty about how much alcohol consumption there really is in san francisco. our best estimate based on the fee proposed originally is that this is worth about $20 million overall, which would exceed the allowable costs a detailed in the study. in terms of the overall impact on consumer spending based on the original fee, with bars and restaurants by $2 million for year, liquor stores by about $4 million per year. the reduction in consumer spending and the rest of the economy by about $14 million each year. the economy wide impact is a
reduction in employment associated with a reduction detail here. the total private sector job loss is between 60 and 80 each year without changing much from year to year over the next 20 years. there is an equivalent job gains associated with the expansion of city spending. therefore the net economic impact is measured in jobs and gross city product as very small and effectively negligible given the size of the economy and sensitivity of the economic model. looking forward this is based on a 3% escalation in costs of services in fee revenue. there is nothing magic in that 3%.
vic could be higher or lower. but the finding of a neutral impact is not sensitive to that. the escalation could be much higher and you would essentially still have the same trade-off. i think they have a last slide of reverent -- recommendations. supervisors accommodating than -- accommodating that. thank you. supervisor avalos: you talk about a growth in jobs on the public sector side, showing a growth in jobs. >> we are already providing these services. what the legislation does is provide a new and more secure
way of funding these services. that is why we cannot be more specific about what will happen with that additional revenue and job numbers i am fighting with the city budget, based on the total size of the city budget and henkel. as is generally the case with tax measures, there is a stimulus effect associated with city budget growth and we are not able to go into detail about what that looks like. supervisor avalos: thank you. if you have no direct questions? supervisor mirkarimi: thank you. first, we did not have a chance to make an opening statement, so i would like to thank the supervisor for his leadership on this measure and the more rain
institute, who we have worked with over in numbers of year -- number of years. also to a number of the non- profit advocacy service based organizations that can speak from experience as to why a lot of this type is needed and san francisco is poised to help. i look forward to hearing from the industry community, i think that their instincts, in a fee like this, what could be the detrimental or blow back of fact to the industry that feels that the economy is as fragile as ours in this downturn that
somehow it will compound the adverse impact. when you speak, we do not know the alcohol consumption in san francisco but we are a compact city that has, from what we know, for square-mile a fair amount of alcohol service establishments that parallels some of the largest cities in the united states based on per capita how many actual restaurants and bars that we have, and how many retail establishments that there are for purchasing alcohol. i do not know how that might have been factored into your analysis. >> the original estimate came from a nexus study. call my understanding is that
the authors wanted to rely on credible, why be accepted, widely used data for of all use. i would agree that there seem to be far more alcohol licenses in san francisco than a difficult city our size. if someone was to show me hard data that says look, on a residential bases there is a lot more of all consumption, i would not be surprised about that. on the other hand, i cannot as an economist second-guess the reliance of credible third-party data sources. i felt that in doing our independent review it was important to consider our large tourism industry. and it's much larger restaurant and bar industry that you see statewide the needs to be accounted for at some time.
i do take your point. we do not have a clear sense of what the alcohol consumption is. the i think that the additional level of review that we provided, if you like a more cautious estimate, we would proceed on that basis. >> what about an unintended consequence between mom-and-pop against the more well- established, larger chains and franchisees that might be able to absorb what could be perceived as a disproportionate shot in how that might actually reorient any kind of adaption to this >> we do find it will
reduce the business on the retail side in terms of what experiences, we are experiencing an industrywide number that would not surprise me at all of the more marginal struggle in small businesses were the ones that suffered the most. i do not know if those will go out of business in this deed, but certainly the larger, more established businesses will be able to support this better and use it in a competitive way against a smaller rival. they would have a harder time with that. they might be able to pass it on to their customers, who might have less disposable income and might be less tolerant and might not by as much. which would go directly to the top and bottom line. supervisor mirkarimi: that was the same logic would help the
san francisco about the fees associated with restaurants and eating establishments that had to pass on those cost, that we would be able to establish our own version of a san francisco universal health care type system, correct? quite correct. supervisor mirkarimi: did this guy fall? >> i have not done a complete economic analysis. i would say, however, that the way that the current legislation is designed, being that falls on the wholesaler, it is up to the wholesaler to pass on the cost. they will not care about the size of the retail business. supervisor mirkarimi: from an economic perspective, we are a healthy city. one of the top in the united states.
probably one of the happiest cities by those that were polled. probably one of the most beautiful cities in the united states. so, you are thinking that with all of those variables lined up, we can absorb this? of >> i would not want to say anything of that level of generality. we think that it will impact business and consumer spending. we think that the expansion of the city's budget has proportional economic impact. at the maximum and in the original legislation we have maybe $20 million fee that is brought down war in the neighborhood of $40,000,000.14999999 dollars. not likely to have a decisive impact citywide. which is not to say it will not impact some participants. supervisor mirkarimi: supervisor avalos: thank you supervisor
elsbernd: -- supervisor mirkarimi: thank you. supervisor avalos: supervisor elsbernd. supervisor elsbernd: following up on the economic impact on jobs and the public sector job growth, i almost wonder if your section of the comptroller's office and the other section of the comptroller's office might want to communicate a little bit in that respectively over the next few years it would be a mistake to say that the budget will grow. looking ahead we know that we have a budget deficit. to say that new jobs will be created, would not be more accurate to say that we will retain jobs? instead of getting new jobs?
>> you are absolutely right on that point. i do not want to give representation that this represents a gross of the public sector. these are jobs that will not be lost just because the city revenue is growing by $15 million in the context of the revenue loss experience. supervisor elsbernd: potentially there is retention of public- sector jobs but a net loss of private sector jobs. >> yes. supervisor elsbernd: what this represents to us is the exchange of a loss of private sector jobs for the potential retention of public-sector jobs? >> correct. supervisor avalos: i would like to interject, i think it is about keeping services.
i do share your concerns, in my mind the purpose of this is to retain the services. that is my question as well as to how we consider this to be about job growth. it does not seem like it can do that with a deficit limits over us. >> in the same way that we cannot say that based on the industry going down, on this policy there might be less employment in their otherwise would be. in the public sector there would be more employment than their otherwise would be, not to say it is the biggest thing driving employment in that time period. i would not want to give the impression that private-sector job losses are a sure thing. there is uncertainty about the revenue. if it comes in less, the benefit
to the city will be less and the cost of the private sector will be less as well. supervisor elsbernd: the assumption that you have, if i understood that right, there is an understanding that there might be a decrease in overall sales tax revenue? >> yes, it was. the shows approximately $5 million. supervisor elsbernd: which slide? >> slide #13. this shows a $6 million decline in retail establishments. a $6 million loss in revenue corresponds to a $60,000 revenue sales tax laws.
supervisor elsbernd: the question on the nexus study, one of the big picture concerns that we have about this, in looking at page 4 of the presentation, itemizing the various costs that we are recouping, in looking at those costs, is the nexus study identifies the total number of individuals served, does it compare to the individuals in san francisco naming a fee? is the question cleared?
>> if in the stand correctly, the study does not say that this is how many are served by the programs in the cost recovery, that information might be available but it is knobs for those receiving services. the study does not explicitly do that. it does not really need to. >> one of the things that gives me pause about this in my own view of the numbers, i would be willing to bet that the total number of individuals served by these services compared to the total number of paying a fee, the later number is going to be exponentially higher. big question to the controller, and i do not need an answer right now, but if you could give
me examples of other city fees with those that pay the total number of individuals, businesses, or entity's the pay the fee are exponentially higher as served by the revenue producer, if you could give me other examples, i cannot think of one but i would like to know the answer. in terms of implementation, i have questions about how this will work. supervisor avalos: another way to look at who is served broadly by the feed, i think we all benefit from the services provided for people that are caught up in the cycle alcoholism. it is something that we have is
a service because san franciscans of value that service. who is benefiting is broader than the individual that simply provide the service. >> i could not agree more. it does lead to the question that goes to the person on the far left, is this a fee or a tax? i think that that issue, we do not need to get into that debate here, but we do have to start getting into something that is paid for by a large number of people, it is important that we are aware of that. supervisor avalos: as far as it being paid for by the wholesalers and distributors of alcohol. >> if we heard from ted, we practically no who will pay this, it will be the consumer.
let me just understand how the treasurer or tax collector will do their job upon passage of this. >> there are two categories of businesses that will pay the fee. the third is wholesaler distributors. supervisor avalos: 4000 in the state? the country? >> 4000 located all over the state and out of the state as well. supervisor avalos: david, you are too tall. we will excuse you. thank you. >> there are 4000 distributors across the country licensed to sell in the state of california. supervisor avalos: we have no
international distributors? >> not to my knowledge. this is from the state collected excise tax on all fall, a large group that is a 4000 group all along with a smaller group of manufacturers that sell within the jurisdiction of san francisco. that number is very small. as we understand it, that is the entirety of the universe licensed to sell alcohol to retailers in san francisco competitively. we would have those groups in the forum once each quarter, looking at how much is sold in each category. for those sales in 7 cisco and sales that occurred. -- san francisco and those sales that occurred. supervisor mirkarimi: are